What Does It Take To Be A Professional Forex Trader?

Takeaway: There are five factors that dictate how successful a forex trader will be at speculation.

A lot of stats get thrown around in today’s world. A common one is that 90-95% of all retail forex traders lose money. Whether it is accurate or not, it is worth considering what it takes to be in that top 5-10% of traders. In other words, what does it take to be a professional forex trader.

When Is a Forex Trader a Professional Forex Trader?

In the simplest terms, being a professional forex trader means you are making the majority of your income in the form of profits from currency trading. Of course, bank employees running trading desks are also considered professional forex traders. They do earn their salary by trading forex on behalf of the bank, but they are paid whether they profit or not. For our purposes, a professional forex trader is an individual who enjoys the full profits of his or her trading as well as the risks of loss.

The Demands of a Career in Currency Speculation

At the end of the day, a currency trader is a speculator just like speculators in any other market. There are five factors that dictate how successful a forex trader will be at speculation.

1. Time

Although this is a bit obvious, many people don’t realize that being a professional forex trader is a full-time job that requires dedicated time and energy. In fact, being a professional forex trader usually means going beyond full-time in terms of mental energy. Events and information rule the forex market, so professional traders have to be aware of what is happening. A trader’s time frame may allow more leeway in monitoring the market, but when your income is riding on a trade, you will find that you think of it and check on it even when the trading session in your part of the world is over. (For more on time frames, check out How To Choose Your Forex Trading Time Frame.)

2. Resources

In terms of forex, resources refers to your trading capital and your tech. While it is absolutely true that forex trading allows you to start and make money with very little capital thanks to margin accounts and leverage, a trader’s ability to last usually comes down to the amount of trading capital. Having a decent amount of dedicated capital reduces the need for extreme leverage and allows you to take some losses and live and learn. Similarly, the better access you have to tech, the better your information lines are going to be. Demo accounts can help you learn without capital and there are workarounds for tech and information access, but - generally speaking - the more you have of both, the easier the transition to full time trading is likely to be.

3. Discipline

Discipline in forex trading works on so many levels. A professional forex trader must be disciplined emotionally and able to view every trade from a distance. Similarly, pros have to be disciplined enough to implement their trading plan and tirelessly track, document and improve the process. Lastly, professional traders have to be financially disciplined in making sure that no one trade risks a majority of the trading capital.

4. Determination

Professional forex traders have to be confident in their trading plan. This means they need to be believe in the plan on a psychological level while also finding it to be sound on an intellectual level. This allows them to be decisive in their trading, helping them to persevere or adjust as new opportunities arrive. Paying attention to the fine details of risk management, creating trading rules and documenting processes requires a lot of determination, but it pays off in psychological and intellectual confidence.

5. Knowledge

Professional forex traders have to monitor many different sources of data, including politics, economic releases, technical indicators and so on. Simply aggregating data is useless if the trader doesn’t have the knowledge to turn the data into actionable information. Some forms of forex knowledge can be learned easily, such as the name and likely meaning of a particular chart formation. Other types only come with experience in the forex market and time spent watching the interplay of technical and fundamental data and trying to glean useful information.

The Power of Five

To reach the top 5% of currency traders and gain the coveted title of a professional forex trader requires all five of these factors. Resources without knowledge or discipline is likely to result in a loss of resources. Knowledge, discipline and resources doesn’t help if a trader doesn’t have the time to commit to trading. That said, a professional forex trader is something you become, not something you start out as. Becoming a professional forex trader is a process where you work with what you have to develop what you need. Knowing what is required is an important step in the right direction.(For more advice, check out 7 Tips for Successful Forex Trading.)